Potash Cuts Outlook on Higher Taxes, Foreign Income

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Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, cut its full-year earnings forecast because of higher taxes and lower income from foreign investments.

Profit is now expected to be $1.75 to $2.05 a share, the Saskatoon, Saskatchewan-based company said in a statement Thursday. That’s down from $1.90 to $2.20 seen previously.

Saskatchewan, home to five Potash Corp. mines, unveiled changes to tax rules in March after falling oil prices reduced revenue from energy operations. The province cut rates at which potash miners can deduct capital spending from gross sales.

Potash Corp. said expected income from its various minority stakes in foreign fertilizer producers was revised lower because of “subdued” potash prices and the impact of a labor dispute at Israel Chemicals Ltd.

The Canadian company is undertaking a strategic review of its equity investments. It also holds a stake in Chile’s Soc. Quimica & Minera de Chile SA, which this year has been beset by a boardroom clash over its handling of a tax probe.

Potash Corp. dropped 1 percent to C$39.40 at the close in Toronto.

The company forecasts provincial mining and other taxes will be 20 percent to 22 percent of gross profit margin this year, up from 15 percent to 17 percent previously.

First-quarter net income rose to 44 cents a share from 40 cents a year earlier, missing the 50-cent average of 20 analysts’ estimates compiled by Bloomberg. The company said the period saw pressure from higher taxes and lower prices for nitrogen fertilizer.

Cautious Farms

Sales fell to $1.67 billion from $1.68 billion, beating the average estimate.

While the company said it expects to sell 9.2 to 9.7 million metric tons of potash this year, up from 9.3 million last year, prices may disappoint.

“The underlying story is that U.S. farm income is falling and that’s a reflection of lower crop prices,” Jason Miner, a senior chemicals analyst at Bloomberg Intelligence in Skillman, New Jersey, said by phone before the results were released. “Farms are now more cautious about buying exactly what they need for fertilizer.”

Plymouth, Minnesota-based Mosaic Co., North America’s second-largest potash producer, also reported disappointing first-quarter earnings. Excluding one-time items, profit was 70 cents a share, trailing the 74-cent average estimate.

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